Q: I am planning to retire next year and I am attempting to make my Flexible Spending Accounts open-season decision. I know that if I have money left in my FSA and do not have enough expenses before I retire, I lose that money. However, I don’t know what happens in the reverse situation: If I have received payments that exceed the amount that I have had deducted from my payroll, what happens? An example would be if I elected $2,500 for the year, had paid in $800 from payroll deductions but already had received $1,200 in claims when I retire. What happens with the difference?. What I get from FSAFEDS is that the government eats the difference. Is that correct ? Also, I assume even though I elected $2,500 for the year I am only responsible for what is deducted from the payroll before I retire. Correct?
A: Although I can find nothing that confirms your conclusion, I can’t find anything that says you are wrong. As far as I can tell, FSAFEDS will have to eat the loss. If anyone out there has a better answer, please let me know.